Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues:
Whether there is withholding tax on fees paid to non-residents to access a data bank in the USA.
Position:
Question of fact
Reasons: n/a
TEI QUESTION - JUNE 1996 CONFERENCE
NON-RESIDENT WITHHOLDING TAXES - SECTION 212 & REGULATION 105
Does the Minister consider that withholding under either paragraph 212(1)(d) or Regulation 105 of the Act apply in the following circumstances?
Fees are paid by a Canadian company to a U.S. company for accessing a data bank in the U.S. The data is accessed via telephone or satellite through a computer located in Canada. This information gathered from the data bank is used in the company's operations in Canada and outside the country.
In the determination of the Canadian company's withholding tax obligations under Regulation 105, is it relevant whether it is the Canadian company or the U.S. company that pays for the right to use the satellite or for the renting of the telephone line? If the answer depends on the facts of the situation, could you give specific examples of when the withholding would apply and when it would not?
If withholding applies, how should the allocation between use in Canada and outside Canada be done if it is impossible to determine a percentage of use of the data?
DEPARTMENT'S POSITION
Whether all, or any portion of, such fees or payments are subject to withholding tax is a question of fact which can only be determined with full knowledge of all of the facts concerning a particular situation and after consideration is given to the provisions under paragraph 212(1)(d) of the Act, Regulation 105 and the Canada-U.S. Income Tax Convention (1980).
With respect to each of the questions mentioned above, the Department would be prepared to review the facts of a particular situation to determine whether any withholding tax is required under paragraph 212(1)(d) or Regulation 105 on a specific payment, or portion of such payment.
G. Middleton
April 30, 1996
File #5-961382
Applicable Sections:Paragraph 212(1)(d), Regulation 105 and Article XII of the Canada U.S. Income Tax Convention.
Subject:Fees to access data from a U.S. data bank.